How to Invest on A Student Budget

by Andrew McGuinness     Jul 16, 2019

As a student, investing is probably the last thing on your mind. With little to no extra money left over at the end of each month, investment is little more than a pipe dream for your average student. As nice as it would be to invest and watch your money grow even when there is so little to spare, is it really possible? The answer is yes, if you are determined enough and really scrimp and save. Here are four ways of how to make investing possible, even on a student budget.

1. Save every penny

Saving money isn’t easy when you’re struggling to make ends meet as it is. It isn’t, however, impossible either. In order to save enough money to invest, you just need to figure out where to take these extra funds from. Bank of America makes investing on a tight budget easy for its customers by offering a savings account that rounds up payments made with your card to the nearest dollar. The extra cents collected from this rounding up are collected into your savings account. The money you could save this way would surprise you.

You could also look through the payments leaving your account through direct debit. Many monthly services you are paying with direct debit may not seem to affect your account greatly, but over time this money adds up. How much do you use your gym membership, film membership, transportation services or discount cards despite paying for them on a consistent monthly basis? Getting rid of these unnecessary services will provide you with more than enough money to invest and watch grow elsewhere.

2. 401(k)

Before putting your money into a 401(k), you are advised to read up on everything it involves and whether it is the most beneficial investment for you. As beneficial as a 401(k) may appear to be, and as much as people may advise you to invest in a 401(k) as soon as it is possible to, it is not right for everyone. Actually, a 401(k) doesn’t supply returns that are as high as with some other investments.

Sometimes it’s even better to choose your own investment opportunities and invest independently from this retirement plan. In other words, if you are to invest in a 401(k) and genuinely make the most of it, first and foremost inform yourself of whether the returns will be worth the funds you are putting in.

3. Exchange traded funds

If you are not investing in a 401(k), there are plenty of alternatives to this investment plan. Exchange traded funds or ETFs allow you to invest in several different stocks without choosing them one by one. As a student unaware of the ins and outs of investing, this setup is ideal. Not only do you not have to pick and choose each stock you invest in individually, but a cleverly diversified, expansive number of stocks will be covered with your one investment in exchange traded funds.

There are countless choices available with ETFs, but once you make this one choice to invest, your investment comes as a package of pre-diversified assets more likely to engage in high returns than your common 401(k).

4. Automatic investing plan

There are several different ways of finding the most convenient and efficient investment plan for you. One of the easiest ways of doing so is through an automatic investing plan. Online brokers like Sharebuilder provide automatic investing plans. A substantial benefit from an automatic investing plan is the fact that you are able to invest as much or as little as you choose.

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